These 5 features of digital loyalty programs prioritize customer experience and incentivize larger spend, making the switch from physical punch cards easy for independent coffee shops.
Ditching Punch Cards for Digital
You can't talk loyalty programs in specialty coffee without bringing up Starbucks. The company has invested big money in digitizing their loyalty program and coupling it with mobile ordering to maximize business impact. In fact, in 2021 51% of revenue for company-operated stores was generated by their Starbucks Rewards most loyal customer base.
Though Starbucks might have the most recognized loyalty program on the planet, the success of their program highlights a major opportunity for independent coffee shops to increase sales and lower marketing costs by focusing on evolving they way they re-engage customers in today's digital era.
Below, we outline four key principles to consider as you evaluate the loyalty marketing solution that works best for your coffee shop so you can ditch the old school punchcards and level up the experience for your most loyal and valuable customers.
1. Create a path for increased loyalty
They saying goes that it costs five times more to acquire a new customer than to retain one. For coffee shops, your regulars are key to building a thriving business. You count on them for multiple visits per week and sometimes per day (10% of joe users order 2+ times per day!). As a result, the opportunity to provide more compelling incentives for your most valuable customers is a worthwhile investment. In the loyalty space, that's what we refer to as a tiered loyalty structure.
Tiered loyalty structure rewards your most frequent customers and takes them through a journey that cultivates more frequent behavior. For example, offering new customers small incentives that are earned more quickly can encourage customers to order more often. At first, maybe they go from ordering weekly to ordering a few times a week because they want to earn a reward. Eventually, daily orders become the routine and you just converted a casual customer to valuable regular.
At joe, we analyze behavior and put customers into segments based on purchase frequency. Then, we design nurture programs with discounts paid for by joe to steadily increase purchase behavior targeting purchase occasions that drive incremental purchases to your in-store visits every week. As a result, the average joe user orders 30% more often within the first 3 months and up to 90% more often by month 6 without our coffee shop partners having to lift a finger.
Whether to earn a reward, or redeem one, offering a tiered loyalty system means customers always have a reason to visit your shop.
2. Redemptions built for coffee
At the end of the day, you want your loyalty system to do more than just increase sales - it needs to boost profits. That requires striking a balance with giving customers a compelling offer to keep you top of mind while minimizing your costs associated with any discounts your customers redeem.
This is where coffee shops have a big advantage when it comes to providing exciting rewards programs. If you've priced your menu well, you should make 80-90% profit on drinks (pro tip: as cost of goods increase as a result of supply chain pressure and inflation, don't hesitate to adjust your prices to maintain a healthy business). Conversely, industry average margin on food items hovers around 40-50%.
For a customer that is redeeming a $5 off reward, the perceived value of that discount on a food or drink item is the same. But for the owner, that same redemption on a drink should only cost about $1 (20% food cost X $5) versus $2.50 if it's on food (50% food cost X $5). By making rewards only redeemable on drinks, you increase your profits substantially.
Punch card reward systems, and even reward systems in most POS systems, treat every menu item, and their impact to your bottom line, the same. At joe, we allow customers to earn loyalty points on every purchase, and limit redemptions to only hot and cold drinks categories. As a result joe loyalty users spend 200% more per month than non-loyalty customers, including discounts and rewards.
3. Remove friction, streamline workflow
A big part of creating a loyal customer base that is often overlooked, is optimizing the experience for your most loyal customers. When customers have to wait in line to order their regular drink, dig through their wallet to find their loyalty card, then wait for their daily drink that the barista has already memorized to be made, it takes a little shine off of the experience. Especially when corporate giants offer a friction-free way to redeem those rewards through mobile ordering.
Offering an order ahead solution for your most loyal, and profitable customers gives them the option to always have their order ready when they arrive so they never have to pass you up even if they're running behind. It also drastically streamlines your workflow and frees up time for your barista on the point-of-sale to spend more time engaging new customers that are learning about your menu for the first time.
With joe, a barista can serve 2-3 mobile orders in the same amount of time it takes to fulfill a single in-person transaction by eliminating time required to enter an order, run credit or debit card (or make change with cash), and by adding better visibility into the ordering queue. In fact, the average shop on joe increases sales by over 30% and often have baristas noting that things feel like they've slowed down because workflow is so much more efficient.
4. Unlock effortless growth
You have your hands full making sure you're providing the best customer experience and barista experience possible. It takes a lot to keep a coffee shop hitting on all cylinders from one day to the next. When you consider what loyalty program is for you, focus on solutions that will maximize impact and minimize the time required to manage the technology.
There are lots of loyalty programs that require a monthly fee (regardless of performance) and tend to require shop owners to do the work of coming up with new offers, writing emails, managing customer lists and more. These tools are great if you have a full time employee managing it, but too often marketing to new and existing customers requires time that coffee shop owners simply don't have.
At joe, we automate customer reengagement through data driven deals and personalized offers to meet your customers where they are at. For example, joe can target a customer with an offer at a time of day when they are most likely to act on the discount. If they've previously ordered at 8am, we'll communicated with an exclusive offer the night before, as well as a reminder push notification the morning of! To sweeten the deal, joe pays for the discounts so you get full price for the purchase.
5. Streamline through your point of sale
In coffee, workflow is everything. Most shops describe their existing point of sale on a scale of "we hate it" to "it's simple and it works okay, but it's definitely not built for coffee". The reason for such apathy is that point of sale systems are generally built for restaurants which makes them an ill fit for coffee workflows.
As you consider the loyalty marketing solution that works best for your coffee shop, remember that no single tool or technology you implement exists in a vacuum. Everything is connected when it comes to your workflow and a little bit of friction during your morning rush can cause the whole morning to unravel if things go sideways.
At joe, we believe in embracing what makes coffee different and built our own point of sale solution to streamline your workflow, automate loyalty marketing, and provide a single cohesive solution to maximize the experience for your customers and baristas. After all, a great customer experience begins with happy baristas.